top 7 mistakes employers make - the business advisor · 4 special eport top 7 mistakes employers...

Special Report

Top 7 Mistakes Employers Makewith Group Benefits & Pension Plan Decisions

Special Report - Top 7 Mistakes Employers Make

A Personal Message from Andrea Hansen

“Begin with the end in mind!” Wise words from Stephen Covey and easy to apply in most cases. But in my experience, that idea doesn’t always apply as easily or as often in the world of benefits and pensions. The mistakes I see business owners make with their benefits plans are all too common, despite their best intentions.

We’ve prepared this Special Report to assist you in maximizing the impact of your total rewards strategy and to help you avoid some, if not all, of what I see as the top seven mistakes employers make with group benefits and pension plan decisions.

I believe that when we are equipped with good information, we can make better decisions.

Andrea Hansen

Special Report - Top 7 Mistakes Employers Make Special Report - Top 7 Mistakes Employers Make 54

Got benefits? Too often I find that employers look at having benefits and pension plans as boxes to check. If that’s your approach, it is likely that the plans you have in place are meeting only the most basic expectations. Worse, they could be creating unintended negative consequences.

To have a meaningful impact on recruitment and retention, your benefits and pension program must directly align with your company mission and values and your workplace culture. When you take a holistic view and identify all costs incurred related to the engagement, health and wellness of employees, you will realize the importance of investing strategically in your benefits program. Just as the culture of your business evolves with the changing demographics and dynamics of your workforce, your benefits and total rewards package should change and evolve through regular strategic review.

When was the last time you reviewed your benefits plan? What is your benefits budget as a percentage of payroll? Are you confident you are spending that money wisely?

Successful employers understand that engaged employees have a positive impact on the company’s bottom line. In an effort to improve engagement and create a sense of belonging, security and contribution for their teams, employers often do things like organize social events, buy company-branded gear and set up a benefits program. The problem with this approach is that none of these decisions are coordinated. Many employers do not take a holistic view of employee engagement often enough.

For example, if your company promotes a family-friendly corporate culture, do you invite children to your Christmas party? Are you offering flexibility for parents who are supporting their children’s school and extra-curricular activities? Do your benefits include orthodontic coverage for children? Have you provided access to virtual healthcare?

If your mission is, for example, “To exceed our customers’ expectations in quality, delivery and cost through continuous improvement,” do you have a healthy budget allocated for your own team’s continuous improvement and training to deliver that promise?

Every company should have clear, written core values that are communicated to every employee. But if your total rewards strategy does not reflect those company core values then it’s hindering, not helping. For example, safety is a common company core value. Do you bring in experts to educate employees about posture, about how to prevent back pain and about proper footwear to prevent injuries?

How will your group benefits and pension plans support your mission and values and align with your company culture? Your plans need to be intentionally designed around those key components and in a way that is transparent and valued by employees. Understanding the purpose behind your strategy is the key to avoid being derailed and distracted from your desired results every time an exciting new idea comes along.

Mistake #1Not aligning your benefits and pension strategy with your company mission and values

Every company should have clear, written core values that are communicated to every employee.

Your benefits plan or pension plan should not be looked at in isolation. If you have different advisors for different programs, the advice you receive may be conflicting and confusing. And, if you make a decision in one isolated area, that decision may have unintended consequences in another area. What if you add a Health Spending Account to provide additional benefits and flexibility, but the company matching percentage on your pension plan is not competitive, and it negatively affects the recruitment of top talent?

What’s right for your team, your budget and your overall strategy? With the goal of having an approach that is integrated and balanced for the best return, consider these questions:

» What is your desired position in the marketplace? Do you want to be ahead of the curve or near the average of your competitors?

» Are you at risk if you fall below industry benchmarks? » Are you making data-backed decisions or are they based on subjective opinions or perceptions?

» Are your decisions reactive or proactive?

Benchmarking against comparable companies based on size, industry and geographic region can help you answer these important questions, identify gaps and achieve your competitive advantage. Historical data for your own benefits plan helps you understand your situation and identify trends in your company. Trends can be critical to the decisions you make. Back your decisions with data and increase your confidence in your decision-making.

Mistake #2Making isolated, uninformed decisions

Are your decisions reactive or proactive?


Do you get what you pay for? Benefits are usually the biggest dollar component of your total rewards plan, but do you know how much of your dollar is actually bringing value to your plan? And where is the rest of that dollar going?

Do you get what you pay for? Benefits are usually the biggest dollar component of your total rewards plan, but do you know how much of your dollar is actually bringing value to your plan? And where is the rest of that dollar going?

Chasing lower rates is not a good strategy unless you understand the structure of your premium dollars. Take a look at a sample breakdown of an employee benefit dollar based on a client with 50 employees covered.

» The total annual health premium is $100,000. » $77,000 (77%) goes towards claims and $6,000 (6%) goes towards insurer reserves. Together they make up the incurred claims cost of $83,000.

» The final components, making up 17% of the premium, are operational costs/profit for the benefits service provider, at

» $8,000 (8%), advisor compensation of $6,000 (6%) and premium tax of $3,000 (3%).

But those are really not the numbers that matter. The number you need to know is your target loss ratio (TLR). The higher that

number, the better! That’s where you look for competitive fees. Ultimately, the majority of your cost is claims paid and that can be managed through plan design. Moving from one insurer to another does not let you escape claims paid. If you move to another insurer and the TLR is lower, your savings will be short term.

Here are some general guidelines for employers with insured plans:

» Companies with 100+ employees should expect a TLR of about 85–89%.

» Companies with 50–99 employees should expect a TLR of about 81–84%.

» Smaller companies, with 10–49 employees, often have a much lower TLR, but they can access higher TLRs depending on the firm they work with.

» Businesses with fewer than 10 employees should seek a pooled plan so their premium rates are not subject to drastic changes based on claims utilization.

Mistake #3Lacking understanding of the premium dollar structure

An investment in knowledge pays the best interest.

— Benjamin Franklin

It’s time to redefine wellness. According to a Manulife/Ipsos Reid Health and Wellness Study, “60% of the financially unprepared delayed or didn’t obtain various services aimed to improve their health due to financial constraints.” In contrast, “the financially prepared reveal they’re more than twice as likely as the unprepared to have a strategy to manage and maintain their health.” 1

If financial unpreparedness is a significant source of stress and those who are financially prepared are more likely to maintain their health, then how can we not consider financial health as part of our wellness strategy? And how does all of this affect you as a business owner? In the short term, cash advances, use of sick days, absenteeism, decreased productivity and disengagement are some results of poor financial health. How much time does your payroll department spend tracking attendance and sick days and processing advances?

In the long term, consequences can include delayed retirement. Picture somebody who’s been working with your business for 25 years. This individual has been loyal to your company, has a wealth of knowledge and is at the top of the pay scale. You may notice that your employee, at 65+ years old, has some physical restrictions and maybe it takes longer to complete some tasks. Healthcare needs are rising, as is the probability of a disability. If this individual is not financially prepared for retirement, they need to keep working, but at what cost to the business? Research shows that a comprehensive financial education program can demonstrate a three to one return on investment for your business! 2

As defined by Canada’s Task Force on Financial Literacy, financial literacy means having the “knowledge, skills and confidence to make responsible financial decisions” – in other words, being able to understand and apply financial knowledge and being self-assured enough to make important decisions in the context of your own situation.3 Does your company provide employees with necessary financial literacy education?

Mistake #4Not connecting employee financial wellness to productivity and performance

1 Manulife Financial/Ipsos Reid. Manulife/Ipsos Reid Health and Wealth Study 2015. Manulife Financial, 2015.2 Employee Financial Education Division. Financial Education in the Workplace Survey. EFED, Dec. 2011.3 Government of Canada. “Financial literacy in Canada,” Apr. 16, 2019. https://www.canada.ca/en/financial-consumer-agency/programs/financial-literacy/financial-literacy-history.html.


Do your employees know… » That a cash advance of $1,000 from an “alternative lender” can have interest rates of up to 50%, and that the $1,000 advance will cost $1,342.47 over just 30 days?

» That too many applications for credit will negatively affect their credit history (and most rental agencies will check credit history)?

» That children with a Registered Education Savings Plan are six times more likely to finish high school and attend post-secondary education?4

» That post-secondary education, including living expenses, is estimated to cost $140,000 for children born in 2014?

» That if you retire at age 60, $1 million is the minimum savings goal required at retirement to live within modest means – and increasing life expectancies mean that may not be enough? 5

When we offer pay increases, more benefits, more generous contributions to group retirement plans, more dollars in health and wellness accounts… we provide food for a day. Teaching financial literacy means we can have a positive impact on the overall wellness of our employees and their families and the wellness of our company’s bottom line. That counts!

Give a man a fish and you feed him for a day;teach a man to fish and you feed him for a lifetime.”

4 William Elliott and Sondra G. Beverly. “The role of savings and wealth in reducing ‘wilt’ between expectations and college attendance,” Journal of Children and Poverty 17:2 (2011): 165-185.5 CBC. “Canadians projected to live longer, but can they afford it?” CBC News, Feb. 24, 2017. https://www.cbc.ca/news/canada/life-expectancy-cost-1.3995606.

Many employers are frustrated by escalating employee disability costs. Business owners are looking for new and better solutions to help expedite their employees’ recovery and successful return to work, while containing costs.

The traditional methods of managing employee disability claims, either in-house or through an insurer, no longer address today’s challenges. Realities such as delays in the healthcare system and legislative changes protecting employees’ privacy rights have led to rapidly rising claims costs for employers. While there are solutions for implementing a truly proactive medical management model, what about looking strategically at how you can minimize or prevent disability? Let’s talk about wellness!

Employees in work environments that encourage wellness are… » More satisfied » More positive about their benefits » More willing to help control costs!

However, the number of employers offering wellness programs has stalled at 51%.6 Is this an opportunity for your business to stand out? Do you think that offering incentives and supporting wellness influence employees’ performance and productivity?

A wellness program doesn’t have to be a significant investment in dollars; you don’t have to build an on-site gym. It can be incorporated into the workplace culture and values, such as by allowing flexibility for employees attending important medical appointments. It can be as simple as encouraging walks at lunch or healthy potlucks. If wellness in the workplace means improved employee satisfaction and increased engagement, it will have a positive impact on the reputation of the employer, which affects your attraction and retention of talent, not to mention the cost savings from lower disability, WCB and health premiums, and from better productivity and performance.

Mistake #5Failing to make health and wellness a priority

the number of employers offering wellness programs has stalled at 51%

6 Sanofi Canada. Winds of Change: New Directions in Employee Health Benefits. The Sanofi Canada Healthcare Survey. Sanofi Canada, 2017.

Think about the incredible impact of providing the knowledge, skills and confidence to enable your employees to make responsible financial decisions.


Often, decisions are made with the best of intentions, but sometimes we forget to consult the people the decision affects. Getting feedback and insight from employees, either through focus groups, formal surveys or one-on-one conversations, can provide great insight before you invest time, money, energy and resources in expanding or changing your benefits program or developing new initiatives.

Employers are sometimes quick to reduce benefits coverage to address rising costs and those decisions are often made at the management level, without input from employees.

“If it’s about me, ask me!”

According to The Sanofi Canada Healthcare Survey, 2019, 53% of plan members would be interested in paying more out of pocket for extra coverage.7

Continuous communication with your employees about benefits is critical. Having an employee meeting to review benefits every few years is not enough. Providing “bite-size” benefits tips regularly through internal communications helps to educate employees and increases their understanding of their benefits. It’s also an ongoing reminder of the value of the program and it gives them peace of mind that their needs will be taken care of if the unexpected happens.

Mistake #6Neglecting your employee communication strategy

Continuous communication with your employees about benefits is critical 7 Sanofi Canada. Closing Knowledge Gaps. The Sanofi Canada Healthcare

Survey. Sanofi Canada, 2019.

You need to be clear about the problem you have before you ask for help. Sometimes what your advisor specializes in is not what you need for your unique business.

We are bombarded with new tactics, and the latest and greatest products are continuously being pitched to us – it feels like a maze with no way out. It can be overwhelming to try to evaluate so many different products and options and figure out what to do. Often the result is analysis paralysis and no decision. “No decision” is itself a decision, and every decision has side effects. If a doctor prescribed you a medication without asking what other medication you were taking, would you be skeptical? Before you choose a product, it’s really important to understand what the side effects are. No one solution works for everyone.

So what does your business really need and how will it affect you, your team and your bottom line? When you know what you need from a professional to guide you, you can better evaluate different advisors to ensure the best fit for your organization, just as you would when hiring an employee.

Here are some common concerns business owners have when they are ready to hire a new benefits advisor:

» They are seeking a competitive edge through proprietary products and value-added services.

» They need professional advice about allocating resources to the right elements of a rewards program.

» They want to improve employee engagement and increase productivity.

» Unbiased advice, objective analysis and benchmarking are required.

» They’re looking for tools to improve talent attraction and retention or build the company image.

» The firm needs to manage costs. » Their current advisor has not made continuous support available.

» Their current advisor is not meeting their needs or is offering poor advice.

I think there’s a really big myth out there. Even though basic tasks have become more complex and our day-to-day lives are busier, we are somehow expected to achieve in all aspects of the business. The truth? It is not realistic to expect that we can transform ourselves into “part-time experts” in everything we do.

So if you are not certain you really know where the gaps are in your strategy, you will know you have the right advisor when they ask questions to better understand your concerns, philosophy, workplace culture, demographics, goals and objectives. And if that advisor helps you to uncover those gaps and offers unbiased advice and real solutions, you should be in good hands.

Mistake #7Failing to understand your needs before hiring a specialist

No decision is itself a decision, and every decision has side effects.


I hope this Special Report has provided you with some food for thought regarding the decisions you make about your benefits and pension plans – especially the mistakes to avoid. You may now be asking yourself: What’s next?

As you know, information alone will never change your results. Not your business, your fitness, your health, your golf game… or your benefits and pension plans. Knowledge may change your thinking (if you’re open-minded), but not your results.

Action Is Required to Change Your Results

You must take action to drive performance and achieve your desired results. So, what action should you take?

1. Review the current state of your benefits and pension plans with a specialist you trust to guide you in adding value, managing costs and allocating available resources, time and money to the right elements of your total rewards program.

2. Determine what mistakes you’ve been making and what the side effects are for the company.

3. Craft a plan of action to close the gaps in your current rewards program to maximize your talent strategy and drive performance.

The right actions can help you achieve the desired results. To this end, I would like to offer you a complimentary 57-minute Discovery Meeting. It’s a no-risk opportunity to assess how you have been making decisions, while also exposing the opportunities available to you.

We’ll give you some valuable insights and answer your questions without pressuring you to do anything. It’s our way of adding value first. Plus, we want to see if we’re a good fit for you. Seem fair?

I would also encourage you to take action now. The issues you face today are most likely the same issues you faced a year ago… and they will be the same ones you’ll be facing when you pick up this report again next year.

You have my three assurances:

1. You don’t have to buy anything. Our conversation is completely exploratory.

2. You’ll discover opportunities for you and your business. And we will uncover the known (and hidden) obstacles keeping you from achieving the results you desire.

3. You’ll leave knowing exactly what you should do next, if anything.

Experience the Peace of Mind That Comes from Certainty

Peace of mind is knowing you’re doing everything you can to provide a meaningful employee experience and to attract and retain your key players. It’s knowing you’re achieving the best results for your business, and it’s having confidence that you’re not missing opportunities or wasting your time, energy and money, and knowing that you’re managing costs, adding value and investing in the right elements of your total rewards program.

You have nothing to lose. You can only gain.

Warmly,

Andrea Hansen

PS: This is important. Arguably, the biggest threat to having a meaningful impact for your people, your business and your community is not knowing how vulnerable your program is and what opportunities you are missing to achieve better results.

What’s Next?

The best time to plant a tree was 20 years ago. The second best time is now.– Chinese proverb

Andrea Hansen is a recognized Educator, Writer, Speaker and Benefits Advisor, whom you may have seen in her recurring feature in The Business Advisor Magazine sharing “Stories You Should Know” about local entrepreneurs. With almost 20 years of experience, she helps build and manage customized, compelling employee benefit and pension strategies for growing businesses, helping them find the right combination of benefits to protect, support and optimize their employees’ health and wellbeing.

Andrea is the creator of the Sutton Employee Engagement Wheel™ and she authored and facilitates Sutton’s Maximize your Talent Strategy & Drive Performance workshops to educate employers about the essential components of a total rewards strategy. She is passionate about helping employers effectively allocate their resources, time and money into the right elements of their total rewards program and has helped hundreds of employers maximize and leverage their results.

Andrea is a partner of Sutton Benefits & Pension, and has been recognized for her community leadership as a past recipient of the ATHENA Young Professional Leadership Award, the SYPE Young Professional of the Year Award and a two-time YWCA Women of Distinction nominee. Most recently, Andrea received the Kent Smith-Windsor Leadership Award which recognizes exemplary extraordinary commitment, creativity and effort to promote entrepreneurship in Saskatchewan. One of her many accomplishments is being the co-founder and host of Seeds for Dreams, which offers woman-owned Saskatchewan businesses seed capital through a unique pitch and vote event.

Originally from Raymore, Saskatchewan, Andrea graduated with a Bachelor of Commerce (Distinction) from the University of Saskatchewan, and she holds a specialty designation focused on group benefits design and management (Group Benefits Associate), in addition to a Certified Financial Planner certification.

When Andrea is not working, she appreciates being a hockey mom, staying active and socializing with family and friends in all-seasons. Her husband, Tim, is also a partner of the firm. Together they have two children, Victoria and Broderick. Andrea enjoys watching her daughter play Comets hockey and train with Saskatoon Track and Field Club, and watching her son play hockey in the Redwing Zone and play guitar. She cherishes the time she spends together with her family at their cabin at Fishing Lake.

About The Author

1633A Quebec Avenue

Saskatoon, SK S7K 1V6

1-800-821-4366

Ph: 306-934-5540 suttonplanning.ca

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